California Approves Landmark Bill That Could Reshape The Gig Economy

SAN FRANCISCO, CALIFORNIA - AUGUST 27: After pressure and protests from labor rights groups, like this one in August, California has passed a bill that could reshape the gig economy by requiring companies like Uber and Lyft to consider their contractors as employees. (Photo by Justin Sullivan/Getty Images)

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The Topline: California's senate has passed a bill that will require companies like Uber and Lyft to treat their contract workers as employees in a move that could transform the gig economy.

The bill clarifies and puts into law a decision made by the state's supreme court last year, when judges ruled that a company’s workers should be considered employees under California law if they are fundamental to a company's business or if the company directs them.

The bill was passed Tuesday evening, in a 29 to 11 vote.

Before the bill becomes law it will need to be approved by California's state assembly and then signed Governor Gavin Newsom. Newsom endorsed the bill earlier this month, along with presidential candidates Kamala Harris, Bernie Sanders and Elizabeth Warren.

Around 1 million workers in California would likely become employees when the law kicks in on January 1, 2020.

Uber, Lyft, and DoorDash have opposed the bill and set aside a $90 million fund to campaign for a ballot to exempt them from Assembly Bill 5.

Key Quote: “Today we are determining the future of the California economy,” says Democrat State Senator Maria Elena Durazo. “We can either choose to become complicit in the exploitation of hard-working Californians or we choose to rebuild the working and middle class, protect taxpayers and help responsible businesses thrive in the state.”

Background: The birth of the gig economy marked a huge change in the relationship between business and labor in America. California's move to tip the balance back in favor of the worker could inspire similar moves in New York, Washington and Oregon. Tech companies and customers who have grown used to outsourcing driving, deliveries and other tasks may face higher costs, while the bill could also impact other industries like trucking.

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SAN FRANCISCO, CALIFORNIA - AUGUST 27: After pressure and protests from labor rights groups, like this one in August, California has passed a bill that could reshape the gig economy by requiring companies like Uber and Lyft to consider their contractors as employees. (Photo by Justin Sullivan/Getty Images)

Getty

The Topline: California's senate has passed a bill that will require companies like Uber and Lyft to treat their contract workers as employees in a move that could transform the gig economy.

The bill clarifies and puts into law a decision made by the state's supreme court last year, when judges ruled that a company’s workers should be considered employees under California law if they are fundamental to a company's business or if the company directs them.

The bill was passed Tuesday evening, in a 29 to 11 vote.

Before the bill becomes law it will need to be approved by California's state assembly and then signed Governor Gavin Newsom. Newsom endorsed the bill earlier this month, along with presidential candidates Kamala Harris, Bernie Sanders and Elizabeth Warren.

Around 1 million workers in California would likely become employees when the law kicks in on January 1, 2020.

Uber, Lyft, and DoorDash have opposed the bill and set aside a $90 million fund to campaign for a ballot to exempt them from Assembly Bill 5.

Key Quote: “Today we are determining the future of the California economy,” says Democrat State Senator Maria Elena Durazo. “We can either choose to become complicit in the exploitation of hard-working Californians or we choose to rebuild the working and middle class, protect taxpayers and help responsible businesses thrive in the state.”

Background: The birth of the gig economy marked a huge change in the relationship between business and labor in America. California's move to tip the balance back in favor of the worker could inspire similar moves in New York, Washington and Oregon. Tech companies and customers who have grown used to outsourcing driving, deliveries and other tasks may face higher costs, while the bill could also impact other industries like trucking.